HC grants Bail to Accused in Fraudulent Claim of ITC of ₹9.97 crores

Facts and Issue of the case

The applicant seeks regular bail in connection with FIR No. 263/2018 dated 24.12.2018 registered at Police Station Economic Offences Wing for offences under Sections 420, 468 and 471 of the Indian Penal Code, 1860 [“IPC”].

The FIR was registered on 24.12.2018, originally in respect of offences under Sections 420, 468 and 471 of the IPC, and the only accused named in the FIR was one Sanjay Garg, son of Deep Chand Garg. The FIR alleges cheating and fraud by M/s Saraswati Enterprises [“Saraswati”], of which Sanjay Garg is the proprietor, causing loss to the government for the sum of ₹9.97 crores. Briefly stated, the allegations in the FIR concern unauthorised and fraudulent claim of input tax credit in respect of Goods and Services Tax [“GST”] by Saraswati.

The chargesheet has since been filed on 08.10.2021, wherein the applicant has been named as an accused. The allegation against the applicant is that he and a co-accused [Shubham Khandelwal] have set up a number of fictitious companies, which are being used for the purposes of defrauding the government. It is contented that the accused persons have opened banks accounts in fictitious names and provided their telephone numbers and email addresses in this respect.

A perusal of the chargesheet reveals that the allegation regarding fraudulent transactions causing loss to the government is based upon transactions for the period 27.08.2017 to 22.11.2017. It is stated that the addresses having been found to be fictitious, the mobile numbers and email addresses used for verification at the time of Value Added Tax [“VAT”]/ GST registration were investigated, as also the bank details disclosed by the accused persons. One of the mobile numbers used in the registration of Saraswati as well as in opening of its bank account was found to be in the name of the present applicant.

Mr. Sunil Dalal, learned Senior Counsel for the applicant, submits that the applicant was, in fact, an employee of Shubham Khandelwal only since early 2018 and it is the case of the prosecution itself that the mobile No. 9015824684 was transferred to the applicant’s name only on 13.03.2018, after the transactions in question had already taken place. The registration of the suspect accounts and the opening of the bank account using the said mobile number all pre-date the transfer of the said number to the present applicant. Mr. Dalal states that even in the chargesheet, investigation of the transactions with the purchasers dealing with Saraswati revealed that Shubham Khandelwal was the person who supplied the bills and accepted payments in account of Saraswati.

Mr. Chadha draws courts attention to the contents of the Status Report to submit that the applicant is involved in a complex and well-planned scheme of setting up of fictitious companies, by using fake identities, in order to generate bogus invoices and claiming unauthorised input tax credit to the detriment of the government. He submits that having regard to the facts of this case, the applicant is not entitled to be released on bail.

Observation of the court

Having heard learned counsel for the parties, court is of the view that the chargesheet and a supplementary chargesheet having been filed, the applicant is entitled to bail in the facts and circumstances of the case. From the Status Report quoted above, it appears that the main link of the present applicant with the transactions in question is on the basis of the use of the mobile No. 9015824684 and his email address. As far as the mobile number in question is concerned, the chargesheet and the Status Report reveal that it was transferred to the applicant only on 13.03.2018. The email addresses mentioned in paragraph 6 of the Status Report were also accessed not through the applicant but through another party. In the Status Report, the prosecution has made out a case that the applicant, in conspiracy with Shubham Khandelwal, had registered various bogus firms and opened fictitious bank accounts. The events mentioned in paragraphs 7 and 8 all relate to the year 2017. There is no suggestion in the Status Report that the applicant neither has prior criminal antecedents nor is there any material to suggest that he is a flight risk. The applicant has been in custody for a period of approximately nine months since 14.07.2021. The evidence in the present case is largely documentary, and has already been placed before the Trial Court. The chances of the applicant tampering with the evidence is therefore unlikely.

The seriousness of the offences alone is not conclusive of the applicant’s entitlement to bail, as held by the Supreme Court inter alia in Sanjay Chandra vs. Central Bureau of Investigation (2012) 1 SCC 40.

For the said reasons, the applicant is admitted to bail in connection with FIR No. 263/2018 dated 24.12.2018 registered at Police Station Economic Offences Wing, subject to the following conditions:-

The applicant will furnish a personal bond in the sum of ₹1,00,000/- with two sureties of the like amount, one of which will be from a blood relative of the applicant, to the satisfaction of the Trial Court.
The applicant will remain resident at the address mentioned in the memo of parties [House No. 321/29, Gali No. 6, Dev Nagar, Sonipat, Haryana].
The applicant will inform the Investigating Officer and the Trial Court in advance of any change in his residential address.
The applicant will appear on each and every date fixed before the Trial Court.
The applicant will give his mobile numbers to the IO and ensure that the mobile numbers are kept operational and reachable at all times.
The applicant will not directly or indirectly tamper with evidence or try to influence any of the prosecution witness in the case. In case the same is established, the bail granted to the applicant shall stand cancelled forthwith.